Your Right to Know

The Ohio Lottery’s proposal to put new-generation electronic games in veterans posts and
fraternal lodges is unconstitutional, Ohio Attorney General Mike DeWine says, because it would
provide too little money for education.

“At some point, the net proceeds going to education can reach a point where the whole scheme
becomes unconstitutional,” DeWine said in an interview with
The Dispatch. “The truth is in the numbers.”

DeWine said his office analyzed the lottery’s proposal to place 1,200 machines in locations
around the state and found they would produce an estimated $1,375 for Ohio schools for each
$100,000 bet. By comparison, existing lottery games funnel about $30,000 to education for each
$100,000 bet, he said.

“That clearly in my opinion is not constitutional,” DeWine said. “That would break faith with
the voters of the state of Ohio.... That was how it was sold to the voters. It (the constitutional
amendment) would it not have passed but for that commitment.”

As attorney general, DeWine represents the Ohio Lottery Commission. He would not say what he
has told lottery officials, however, citing attorney-client confidentiality restrictions.

Rob Nichols, spokesman for Gov. John Kasich, said in response that the lottery commission
"shared with the attorney general an initial concept for the Multi Purpose Next Generation
machines. That concept has changed significantly in the interim and continues to be refined. We’ve
scheduled a date in early January to brief him and his staff on the current plan. We expect this
plan will meet any concerns he has raised to date.”

Nichols added, “Under our plan, veterans and fraternals will get more money for charity and
there will be more money for education. Education is currently shut out of the illegal raffle
system.”

The Lottery Commission announced in late October that it would offer 1,200 legal, “next
generation” lottery machines to veterans and fraternal organizations, allowing them to continue
providing money to charity and generating cash for K-12 Ohio schools. They machines were supposed
to replace electronic raffle games that DeWine declared illegal and ordered removed. A judge last
week granted a temporary restraining order, allowing the raffle machines to continue operating
while the court case is pending.

As originally proposed, 15 percent of the lottery machine proceeds were earmarked for
education, with 60 percent going to Intralot, the Greek company that is the lottery commission’s
main game supplier. The remaining 25 percent would go to veteran and fraternal groups to pay for
their operations and provide money to charity. The split of proceeds would change after the first
3½ years, but that hasn’t been finalized.

The next-generation lottery machines are to be built at Intralot offices in Mason, Ohio, and
should be in place in about six months. Among the companies’ lobbyists are Doug Preisse and Robert
Klaffky, both close associates of Kasich.

DeWine was referring to two Ohio constitutional amendments. The first one in 1973 created the
lottery in Ohio. The state legislature subsequently passed a law in 1983 requiring lottery proceeds
– after payoffs to players, lottery and vendor expenses – to go to education. Voters solidified
that commitment in 1987, passing a constitutional amendment earmarking lottery proceeds for
education.

The legislature has played shell games with education funding over the years, still
channeling lottery proceeds to education, but reducing state general fund money to education by an
equivalent amount.

But under state law and the Ohio Constitution, lottery proceeds must go to education. That is
where the attorney general says the lottery runs afoul of the constitution. Neither the law nor the
constitution says specifically how much, or what percentage of the proceeds, should go to
education, but DeWine said less than 1.4 percent ($1,375 of $100,000 wagered) is too little.

“I don’t think that cuts it,” he said. “When the net proceeds get so miniscule, they clearly
do not meet the test of entire net proceeds going to education.”